ECB Bond Exchange Spurs Likelihood of Greek Default Swap Payout

Credit-default swaps insuring Greek government debt may pay out because a proposed bond exchange by the European Central Bank paves the way for losses to be imposed on private investors.

Greece will introduce legislation next week that may allow so-called collective action clauses that force bondholders to accept debt writedowns, Naftemporiki reported. The ECB’s new bonds will have identical structure and nominal value to their current Greek notes, though they will be exempt from CACs, three euro-area officials said.